India–New Zealand free trade agreement to take effect on 20 October

The brief in 8 cards

1. Context1 / 8
   • India and New Zealand signed a free trade agreement (FTA) at Bharat Mandapam, New Delhi, on 27 April 2026.
   • Commerce Minister Piyush Goyal announced on 21 September that it will take effect on 20 October 2026.
   • New Zealand's Parliament passed the enabling law on 16 September.
   • Both sides then exchanged diplomatic notes confirming ratification. Ratification is a country's formal final approval of a treaty.
   • India and New Zealand had first started talks in April 2010. The talks stalled for nearly a decade before restarting in 2025.
2. Key highlights2 / 8

   Full access for India: New Zealand will remove tariffs on 100% of Indian exports from the first day.

   Calibrated access for New Zealand: India offers market access on 70.03% of its tariff lines, covering 95% of bilateral trade. It excludes the remaining 29.97%.

   Three speeds of opening: Duties end at once on 30% of lines, such as wood, wool, sheep meat and raw hides. Another 35.60% fall to zero over 3, 5, 7 or 10 years.

   Quotas for sensitive fruit: Mānuka honey, apples, kiwifruit and albumins, a milk protein, enter India only through tariff-rate quotas.

   Trade target: Both sides aim to double trade in goods and services to almost ₹35,000 crore in the next four or five years.

   Investment pledge: New Zealand has committed to facilitate US$20 billion of investment in India over 15 years.

3. Key concepts3 / 8
   1. Free trade agreement (FTA)

   • An FTA is a deal where two or more countries cut or remove tariffs on most trade between them. A tariff is a tax on imported goods.
   • Each member still sets its own tariffs for countries outside the deal.
   • Distinction: In a customs union, members also share one common tariff for outsiders. The European Union works this way. An FTA does not.
   • Modern FTAs go beyond goods. They also cover services, investment, movement of professionals and cooperation.

   News connection: The India–New Zealand FTA covers goods, services, mobility, investment and farm cooperation in one package.

   2. Tariff lines versus trade value

   • A tariff line is one product category in a country's customs list, such as "fresh apples".
   • Counting tariff lines and counting trade value give different pictures.
   • Analogy: a shop may stock 100 items, but a handful bring in most of its sales. Opening 70% of the items can still cover 95% of the money.
   • That is how India opens 70.03% of lines yet covers 95% of trade value. Most of what New Zealand already sells falls in the opened lines.

   News connection: This lets India keep sensitive lines closed while still opening most actual trade.

   3. Tariff-rate quota (TRQ)

   • A TRQ allows a set quantity of a product in at a low tariff. Imports above that quantity face a higher tariff.
   • Analogy: a discounted ticket for the first 100 people in the queue. Everyone after them pays full price.
   • Example: New Zealand apples can enter at a reduced 25% duty, but only up to 32,500 tonnes in year one. The quota rises to 45,000 tonnes by year six.
   • Some quotas also set a minimum import price. Mānuka honey must be priced at least US$20 per kg to get the lower duty. This stops cheap imports from undercutting Indian honey.

   News connection: TRQs let Indian consumers buy some New Zealand fruit and honey without flooding the market.

   4. Rules of origin

   • Rules of origin decide whether a product truly "comes from" an FTA partner, so it qualifies for the lower tariff.
   • Analogy: they act like a passport for goods. A product without a valid one cannot use the FTA benefit.
   • They stop outsiders from routing goods through a partner country just to dodge tariffs.
   • Exporters must prove origin with certificates. Small firms often find this paperwork hard.

   News connection: Indian MSMEs will gain only if they can meet New Zealand's origin and certification rules.

4. Way forward4 / 8

   Help small exporters use the deal: Set up FTA help desks for MSMEs on origin rules, certificates and market information.

   Link the FTA to industrial policy: Connect export opportunities with PLI schemes and export clusters in pharmaceuticals, engineering and processed food.

   Watch sensitive imports: Track apple, kiwifruit and honey imports closely, and use quotas and safeguards if Indian growers are hurt.

5. Note5 / 8

   What India gains

   Tariffs gone: New Zealand earlier charged up to 10% on some Indian goods, including ceramics, carpets, automobiles and auto components. These duties go.

   Labour-intensive exports: Textiles, leather, footwear, gems and jewellery can compete better. These sectors employ many workers.

   Other exports: Engineering goods, pharmaceuticals and processed food also gain access.

   Investment: The US$20 billion pledge could support manufacturing, infrastructure and start-ups. A pledge to facilitate investment is not a guarantee of money.

   Cheaper inputs: Easier access to wood, coking coal and metal scrap can cut costs for Indian manufacturers.

   Farm knowledge: An Agricultural Productivity Partnership plans Centres of Excellence for apples, kiwifruit and Mānuka honey.

6. Note6 / 8

   Services and people

   Services trade is usually grouped into four "modes", a framework from the WTO's General Agreement on Trade in Services (GATS):

   Mode 1 — Cross-border supply: The service crosses the border, not the people. Example: Indian software delivered online to a New Zealand client.

   Mode 2 — Consumption abroad: The customer travels. Example: an Indian student studying in New Zealand.

   Mode 3 — Commercial presence: A company sets up abroad. Example: an Indian IT firm opening an office in Wellington.

   Mode 4 — Movement of natural persons: A professional travels to work for a time. Example: an Indian nurse or engineer working in New Zealand.

   What the FTA offers: Commitments across 118 services sectors and 5,000 slots for skilled Indian workers. Post-study work pathways run up to three years for STEM graduates and four years for doctoral graduates. [VERIFY: Confirm the terms of each.]

7. Note7 / 8

   What India protected, and how

   Kept out entirely: Milk, cream, whey, yoghurt, cheese and butter. Also onions, chana, peas, corn, almonds, sugar, artificial honey, and vegetable fats and oils.

   Why dairy matters: India's dairy sector supports millions of small farmers. New Zealand is one of the world's largest dairy exporters. India has not given major dairy concessions in any earlier FTA either.

   Not all dairy is closed: Tariffs on bulk infant formula and some dairy-based preparations will be phased out over seven years, New Zealand says.

   Mānuka honey: The current 66% duty falls by 75% over five years, for up to 200 tonnes a year.

   Kiwifruit: Within the quota, kiwifruit enters duty-free. Outside it, the tariff falls by half, from 33% to 16.5%.

   The balance struck: New Zealand opens fully and at once. India opens partly, slowly and with quotas.

8. Note8 / 8

   Challenges ahead

   A small market: New Zealand has only about 5.3 million people. Services and investment may matter more than goods exports.

   Low use of FTAs: Many firms never claim FTA benefits because of origin rules, certification costs or lack of information.

   Non-tariff barriers: Food safety rules, called sanitary and phytosanitary (SPS) standards, can still block Indian farm exports.

   Pressure on small growers: Kiwifruit farmers in Arunachal Pradesh and Sikkim may struggle to match New Zealand on price and quality.

   Investment gap: The US$20 billion pledge still has to become real projects. Clear rules and quick approvals will decide that.

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